Debt Collection Law in the United States: A Detailed Guide

In the United States of America, creditors involve a third party in their loan repayment, called debt collectors. However, some debt collectors harass the debtors or misbehave to get back the loan. To tackle this situation, the state has enacted some rules and regulations for debt collection to protect the debtors from such bad behavior and harassment. In this blog, you will get a detailed guide about debt collection law in the United States. Moreover, you can find ways to tackle difficult situations during interactions with the collecting agents in this article.

Debt collection law in the United States of America

The New York Department of Financial Services passed new legislation in March 2015 that provides some of the best protections against unlawful strategies and abuses in state debt collecting. Moreover, this law protects the debtors from unlawful legal situations and lawsuits. Therefore, the state enacted the Fair Debt Collection Practices Act (FDCPA) to safeguard the debtors and defend their rights.

The Fair Debt Collection Practices Act (FDCPA)

The federal law known as the Fair Debt Collection Practices Act (FDCPA) restricts the procedures that debt collectors can take to collect particular types of debt. Debt reporting in credit reports is governed by the federal Fair Credit Reporting Act (FCRA). State laws also offer protection against unfair and misleading activities.

Debt collection businesses are not allowed to use abusive, unfair, or deceptive techniques to collect debts from you, according to the FDCPA.  It usually doesn’t cover collection attempts made by the original creditor or company you owed money or commercial commitments.

Debt buyers, collection agencies, and attorneys are all considered debt collectors under the FDCPA. When a debt collector covered by the FDCPA contacts you, they must provide you with specific details about the debt.

What can debt collectors do and don’t?

Under the FDCPA, debt collectors have limitations on debt repayment. The state has restricted all collection firms and companies. However, here is a list of dos and don’ts for these collecting firms to contact the debtors.

Dos

The collection agencies can adopt some actions and activities to repay the loan.

Fix the time and place for a meeting.

The collection company can call or contact you to arrange a time and place for a meeting about the loan repayment.

Disconnect the call if you are busy.

You can tell them if you are at the workplace or busy with some important work. The collecting agent must disconnect the call and not call again if you request to do so after some time.

Contact your attorney if appointed.

The collecting agent cannot contact you directly if you tell them about your attorney. You must provide your legal advisor’s contact number and address to discuss the loan.

Don’ts Harassment

The collection firm cannot harass you in any way or any place. They cannot contact you more than once daily and cannot step to your doorstep to demand repayment.

Contacting again and again

Moreover, all the collecting companies are prohibited from calling you repeatedly and contacting you at inappropriate times.

Telling friends and family

Furthermore, they can’t tell your family or friends about your loan details. They cannot share it even with your parents, spouse, or kids.

Socially disclose your debts.

In addition, these agents cannot disclose your debt details on social media or any other platform to disgrace and humiliate you.

Rights under FDCPA for debtors

You can file a lawsuit against a collector in a state or federal court and report them. You have one year from the date of the collector’s violation of the law to launch a case. Moreover, you have the right to file a lawsuit to recover damages if the debt collector causes you to lose your job or incur medical expenses.

The judge may still give you a $1,000 award in addition to paying your legal fees and court expenses if you cannot provide proof of damages. However, you can still be responsible for the debt, even if a judge finds that the debt collector broke the FDCPA.

Dealing with debt collectors

In the USA, most citizens take debts to fulfill their personal needs, such as educational purposes, health care issues, or other needs. Some didn’t repay the loan due to financial crisis or other reasons. That’s why the creditors choose a third party to repay their loans. However, dealing with debt collectors is somehow very tricky. You can deal with them only when you behave sensibly and wisely.

When the collection firms contact you for repayment, always ask for your loan details and check the conditions. Sometimes, these firms contact you mistakenly, and sometimes, they ask you to repay an expired loan. So, before dealing with these collecting agents, you must check all the documents and the written debt agreement.

Written application to stop contacting

If you are a debtor of any creditors’ company and the debt collectors are after you, you can stop them from contacting you. Moreover, if you cannot pay the debt on the spot, you can get a stay from the court. Also, you can contact the debt collection firm through a written application to stop the agents from contacting you. Furthermore, if you are willing to pay the whole debt in installments, you can also request it by writing an application.

Negotiating with debt collectors

In the USA, many creditors sell their debts to collection agencies at lower prices. However, in this situation, you can benefit from it and try to negotiate with the debt collector. This act can be risky, but you must try it decently and deliberately. If the debt collection firm has purchased your debt at a lower price, you can also set your debt repayment at a lower rate. Moreover, this procedure may take time, but if successful, you can pay less of your old debt.

What should you do if debt collectors contact you in an inappropriate way and at the wrong time?

In the USA, the debt collectors are prohibited from contacting you inappropriately. They are also restricted to contacting you in the early morning before 8 o’clock and late at night after 9 pm. According to FDCPA, they cannot step forward at your doorstep and harass you. Furthermore, the USA laws protect debtors and creditors from loss and mismanagement. However, if any agent from debt collection is involved in such restricted activities, you can complain against them.

Where should you report the collector agencies’ wrongdoings?

If your debt collector firm behaves abusively and uses deceptive business practices, you can complain against them. However, every state has different rules for debt collection agencies that may not match federal laws. Moreover, you must consult your state’s attorney general office to seek information and your rights according to your state. Meanwhile, any malpractices from the debt collectors can be reported.

You can complain about the debt collectors at

  •   your state attorney general’s office
  •   the Federal Trade Commission
  •   the Consumer Financial Protection Bureau

Can debt collectors sue you or garnish the wages?

Yes, the debt collectors can sue you and garnish the wages. Your paycheck may be stopped to pay off debts. Additionally, a collector may obtain a court order to deduct funds from your bank account. You risk losing the opportunity to contest a court order if you ignore the lawsuit. The court may order you to sell your property, if you have any, to pay the loan.

Can debt collectors add interest to the original amount?

Yes, the debt collectors can add interest to the original amount. Sometimes, the creditors sell their debt to some debt collection firms at the lowest price. Therefore, collecting the old debt from debtors is a total headache for that specific collection firm. In this situation, the collection firm can add interest to the original amount on certain conditions, like installments or repayment after a particular time.

Filing bankruptcy

Filing bankruptcy can also be another risky option if you cannot pay the loan or debt. However, consider it the last option. You can take this step if you cannot pay the loan and your income resources don’t allow you to repay or settle with the collection agencies.

But, before filing for bankruptcy, consult your lawyer or legal advisor. This is a very risky option because you can never apply for any loan or debt from any creditor firm in the future. The bank will declare you bankrupt, and your assets can be frozen until court orders. Moreover, this step may also affect your job and other income resources.

Conclusion

Concluding all the above, we can say that the debt collection law in the United States is very ethical and logical legislation that protects debtors from misbehavior and the wrong business tactics of debt collectors. However, when creditors fail to collect their loans, they involve a third party. Sometimes, these creditors sell the debts to the debt-collecting companies and cover their maximum loss. In this process, the collection firms contact the debtors independently and try to settle the loan repayment. However, the FDCPA safeguards the debtors and protects them from harassment, misleading behavior, and wrongdoing by these collection firms.

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